Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period __________ to __________

Commission File Number: 001-38534
 
Mercantil Bank Holding Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
Florida
(State or other jurisdiction of
incorporation or organization)
65-0032379
(I.R.S. Employer
Identification No.)
220 Alhambra Circle
Coral Gables, Florida
33134
(Address of principal executive offices)
(Zip Code)
(305) 460-8728
Registrant’s telephone number, including area code
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                     Yes  ý                                        No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý                                         No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
 
Accelerated filer ¨
 
Smaller reporting company ¨
 
Emerging growth company ý
Non-accelerated filer ý (Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ¨           No ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbols
Name of exchange on which registered
Class A Common Stock
AMTB
NASDAQ
Class B Common Stock
AMTBB
NASDAQ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
 
Outstanding as of May 10, 2019
Class A Common Stock, $0.10 par value per share
 
28,985,996 shares of Class A Common Stock
Class B Common Stock, $0.10 par value per share
 
14,218,596 shares of Class B Common Stock

1



MERCANTIL BANK HOLDING CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 2019
INDEX
Page
 
 
 
 
 
 
 


2

Table of Contents


Part 1. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS
Mercantil Bank Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited) March 31, 2019
 
December 31, 2018
Assets
 
 
 
Cash and due from banks
$
26,821

 
$
25,756

Interest earning deposits with banks
62,868

 
59,954

Cash and cash equivalents
89,689

 
85,710

Securities
 
 
 
Available for sale
1,551,591

 
1,586,051

Held to maturity
83,909

 
85,188

Federal Reserve Bank and Federal Home Loan Bank stock
65,828

 
70,189

Securities
1,701,328

 
1,741,428

Loans held for sale
9,968

 

Loans held for investment, gross
5,734,438

 
5,920,175

Less: Allowance for loan losses
60,322

 
61,762

Loans held for investment, net
5,674,116

 
5,858,413

Bank owned life insurance
207,546

 
206,142

Premises and equipment, net
123,930

 
123,503

Deferred tax assets, net
9,858

 
16,310

Goodwill
19,193

 
19,193

Accrued interest receivable and other assets
66,727

 
73,648

Total assets
$
7,902,355

 
$
8,124,347

Liabilities and Stockholders' Equity
 
 
 
Deposits
 
 
 
Demand
 
 
 
Noninterest bearing
$
775,015

 
$
768,822

Interest bearing
1,229,487

 
1,288,030

Savings and money market
1,524,554

 
1,588,703

Time
2,359,132

 
2,387,131

Total deposits
5,888,188

 
6,032,686

Advances from the Federal Home Loan Bank and other borrowings
1,070,000

 
1,166,000

Junior subordinated debentures held by trust subsidiaries
118,110

 
118,110

Accounts payable, accrued liabilities and other liabilities
47,308

 
60,133

Total liabilities
7,123,606

 
7,376,929

Commitments and contingencies (Note 12)

 

 
 
 
 
Stockholders’ equity
 
 
 
Class A common stock, $0.10 par value, 400 million shares authorized; 28,985,996 shares issued and outstanding (2018: 26,851,832 shares issued and outstanding)
2,899

 
2,686

Class B common stock, $0.10 par value, 100 million shares authorized; 17,751,053 shares issued; 14,218,596 shares outstanding (2018:16,330,917 shares outstanding)
1,775

 
1,775

Additional paid in capital
415,864

 
385,367

Treasury stock, at cost; 3,532,457 shares of Class B common stock (2018: 1,420,136 shares of Class B common stock)
(46,373
)
 
(17,908
)
Retained earnings
406,733

 
393,662

Accumulated other comprehensive loss
(2,149
)
 
(18,164
)
Total stockholders' equity
778,749

 
747,418

Total liabilities and stockholders' equity
$
7,902,355

 
$
8,124,347


The accompanying notes are an integral part of these consolidated financial statements (unaudited).
3

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

 
Three Months Ended March 31,
(in thousands, except per share data)
2019
 
2018
Interest income
 
 
 
Loans
$
66,722

 
$
59,670

Investment securities
12,581

 
11,741

Interest earning deposits with banks
1,004

 
520

Total interest income
80,307

 
71,931

 
 
 
 
Interest expense
 
 
 
Interest bearing demand deposits
274

 
89

Savings and money market deposits
3,733

 
2,584

Time deposits
12,553

 
8,700

Advances from the Federal Home Loan Bank
6,205

 
5,990

Junior subordinated debentures
2,105

 
1,935

Total interest expense
24,870

 
19,298

Net interest income
55,437

 
52,633

Provision for loan losses

 

Net interest income after provision for loan losses
55,437

 
52,633

 
 
 
 
Noninterest income
 
 
 
Deposits and service fees
4,086

 
4,582

Brokerage, advisory and fiduciary activities
3,688

 
4,415

Change in cash surrender value of bank owned life insurance
1,404

 
1,444

Cards and trade finance servicing fees
915

 
1,062

Gain on early extinguishment of advances from the Federal Home Loan Bank
557

 

Data processing and fees for other services
520

 
881

Securities gains, net
4

 

Other noninterest income
1,982

 
1,561

Total noninterest income
13,156

 
13,945

 
 
 
 
Noninterest expense
 
 
 
Salaries and employee benefits
33,437

 
34,041

Occupancy and equipment
4,042

 
3,715

Professional and other services fees
3,444

 
6,444

Telecommunication and data processing
3,026

 
3,084

Depreciation and amortization
1,942

 
2,141

FDIC assessments and insurance
1,393

 
1,447

Other operating expenses
4,661

 
4,773

Total noninterest expenses
51,945

 
55,645

Net income before income tax
16,648

 
10,933

Income tax expense
(3,577
)
 
(1,504
)
Net income
$
13,071

 
$
9,429

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements (unaudited).
4

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

 
Three Months Ended March 31,
(in thousands, except per share data)
2019
 
2018
 
 
 
 
Other comprehensive income (loss), net of tax
 
 
 
Net unrealized holding gains (losses) on securities available for sale arising during the period
$
16,278

 
$
(14,977
)
Net unrealized holding (losses) gains on cash flow hedges arising during the period
(11
)
 
4,280

Reclassification adjustment for net (gains) losses included in net income
(252
)
 
90

Other comprehensive income (loss)
16,015

 
(10,607
)
Comprehensive income (loss)
$
29,086

 
$
(1,178
)
 
 
 
 
Earnings Per Share (Note 14):
 
 
 
Basic earnings per common share
$
0.31

 
$
0.22

Diluted earnings per common share
$
0.30

 
$
0.22


The accompanying notes are an integral part of these consolidated financial statements (unaudited).
5

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Three Months Ended March 31, 2019 and 2018


 
Common Stock
 
Additional
Paid
in Capital
 
Treasury Stock
 
Retained
Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders'
Equity
(in thousands, except share data)
Shares Outstanding
 
Issued Shares - Par Value
 
 
 
 
 
Class A
 
Class B
 
Class A
 
Class B
 
 
 
 
 
Balance at
December 31, 2017
24,737,470

 
17,751,053

 
$
2,474

 
$
1,775

 
$
367,505

 
$

 
$
387,829

 
$
(6,133
)
 
$
753,450

Dividends

 

 

 

 

 

 
(40,000
)
 

 
(40,000
)
Net income

 

 

 

 

 

 
9,429

 

 
9,429

Other comprehensive loss

 

 

 

 

 

 

 
(10,607
)
 
(10,607
)
Balance at
March 31, 2018
24,737,470

 
17,751,053

 
$
2,474

 
$
1,775

 
$
367,505

 
$

 
$
357,258

 
$
(16,740
)
 
$
712,272

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at
December 31, 2018
26,851,832

 
16,330,917

 
$
2,686

 
$
1,775

 
$
385,367

 
$
(17,908
)
 
$
393,662

 
$
(18,164
)
 
$
747,418

Common stock issued
2,132,865

 

 
213

 

 
29,005

 

 

 

 
29,218

Repurchase of Class B common stock

 
(2,112,321
)
 

 

 

 
(28,465
)
 

 

 
(28,465
)
Restricted stock issued
1,299

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 
1,492

 

 

 

 
1,492

Net income

 

 

 

 

 

 
13,071

 

 
13,071

Other comprehensive income

 

 

 

 

 

 

 
16,015

 
16,015

Balance at
March 31, 2019
28,985,996

 
14,218,596

 
$
2,899

 
$
1,775

 
$
415,864

 
$
(46,373
)
 
$
406,733

 
$
(2,149
)
 
$
778,749


The accompanying notes are an integral part of these consolidated financial statements (unaudited).
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Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)


 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Cash flows from operating activities
 
 
 
Net income
$
13,071

 
$
9,429

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Provision for loan losses

 

Net premium amortization on securities
3,453

 
4,411

Depreciation and amortization
1,942

 
2,141

Stock-based compensation expense
1,492

 

Increase in cash surrender value of bank owned life insurance
(1,404
)
 
(1,444
)
Deferred taxes, securities net gains or losses and others
1,238

 
(5,349
)
Gain on early extinguishment of advances from the FHLB
(557
)
 

Net changes in operating assets and liabilities:
 
 
 
Accrued interest receivable and other assets
8,777

 
(6,679
)
Account payable, accrued liabilities and other liabilities
(15,431
)
 
11,132

Net cash provided by operating activities
12,581

 
13,641

 
 
 
 
Cash flows from investing activities
 
 
 
Purchases of investment securities:
 
 
 
Available for sale
(110,170
)
 
(60,793
)
Federal Home Loan Bank stock
(4,888
)
 
(6,802
)
 
(115,058
)
 
(67,595
)
Maturities, sales and calls of investment securities:
 
 
 
Available for sale
162,796

 
57,028

Held to maturity
1,205

 
531

Federal Home Loan Bank stock
9,248

 
4,250

 
173,249

 
61,809

Net decrease in loans
22,173

 
108,571

Proceeds from loan portfolio sales
152,177

 
12,958

Net purchases of premises and equipment, and others
(1,951
)
 
(1,904
)
Net proceeds from sale of subsidiary

 
7,500

Net cash provided by investing activities
230,590

 
121,339

 
 
 
 
Cash flows from financing activities
 
 
 
Net decrease in demand, savings and money market accounts
(116,499
)
 
(96,787
)
Net (decrease) increase in time deposits
(27,999
)
 
54,019

Proceeds from Advances from the Federal Home Loan Bank and other borrowings
170,000

 
430,000

Repayments of Advances from the Federal Home Loan Bank and other borrowings
(265,447
)
 
(370,000
)
Dividend paid

 
(40,000
)
Proceeds from common stock issued - Class A
29,218

 

Repurchase of common stock - Class B
(28,465
)
 

Net cash used in financing activities
(239,192
)
 
(22,768
)
Net increase in cash and cash equivalents
3,979

 
112,212

 
 
 
 
Cash and cash equivalents
 
 
 
Beginning of period
85,710

 
153,445

End of period
$
89,689

 
$
265,657

 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements (unaudited).
7

Mercantil Bank Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (continued)

 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Supplemental disclosures of cash flow information
 
 
 
Cash paid:
 
 
 
Interest
$
24,086

 
$
18,255

Income taxes
385

 
81


The accompanying notes are an integral part of these consolidated financial statements (unaudited).
8

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


1.
Business, Basis of Presentation and Summary of Significant Accounting Policies
a) Business
Mercantil Bank Holding Corporation (the “Company”), is a Florida corporation incorporated in 1985, which has operated since January 1987. The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as a result of its 100% indirect ownership of Amerant Bank, N.A. (the “Bank”). The Company’s principal office is in the City of Coral Gables, Florida. The Bank is a member of the Federal Reserve Bank of Atlanta (“Federal Reserve ”) and the Federal Home Loan Bank of Atlanta (“FHLB”). The Bank has two principal subsidiaries, Amerant Investments, Inc. a securities broker-dealer (“Amerant Investments”), and Amerant Trust, N.A, a non-depository trust company (“Amerant Trust”).
The Company is rebranding as “Amerant.” The Company’s principal subsidiaries have adopted this name and logo. The Company will use the Amerant brand and will officially change its corporate name upon approval at its annual shareholders’ meeting in June 2019.
The Company’s Class A common stock, par value $0.10 per common share, and Class B common stock, par value $0.10 per common share, are listed and trade on the Nasdaq Global Select Market under the symbols “AMTB” and “AMTBB,” respectively.
b) Initial Public Offering and Shares Repurchase
On December 21, 2018, the Company completed an initial public offering (the “IPO”). For more information about the IPO, see Note 15 to our audited consolidated financial statements included in the Company’s annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 1, 2019 (the “Form 10-K”). In March 2019, following the partial exercise of the over-allotment option by the IPO’s underwriters, and completion of certain private placements of shares of the Company’s Class A common stock, the Company repurchased the remaining shares of its Class B common stock held by Mercantil Servicios Financieros, C.A., or MSF, the Company’s former parent company. See Note 11 to these unaudited interim consolidated financial statements for more information about the private placements and the repurchase of Class B common stock previously held by MSF.
c) Subsequent Events
The effects of significant subsequent events, if any, have been recognized or disclosed in these unaudited interim consolidated financial statements.
d) Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required for a fair statement of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). These unaudited interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year or any other period. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2018 and 2017 and for each of the three years in the period ended December 31, 2018 and the accompanying footnote disclosures for the Company, which are included in the Form 10-K.

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Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)

For a complete summary of our significant accounting policies, please see Note 1 to the Company’s audited consolidated financial statements on the Form 10-K.
Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include: (i) the determination of the allowance for loan losses; (ii) the fair values of securities and the reporting unit to which goodwill has been assigned during the annual goodwill impairment test; (iii) the cash surrender value of bank owned life insurance; and (iv) the determination of whether the amount of deferred tax assets will more likely than not be realized. Management believes that these estimates are appropriate. Actual results could differ from these estimates.
Revisions
In 2018, the Company determined to revise its presentation of loans by classes to correct for certain immaterial misclassifications in the presentation of loans by classes in the footnotes to the Company’s unaudited interim consolidated financial statements as of March 31, 2018. The Company assessed the impact of these misclassifications and determined they had no effect on the unaudited interim consolidated balance sheet as of March 31, 2018, the unaudited interim consolidated statements of operations and comprehensive income or the unaudited interim consolidated statement of cash flows for the three months ended March 31, 2018.
The following tables show the effects of the correction of the misclassifications to the footnotes to the Company’s unaudited interim consolidated financial statements as of March 31, 2018. This change in classification is reflected in the footnotes to the unaudited interim consolidated financial statements as of March 31, 2019 and for the three months ended March 31, 2019 and 2018.

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Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


Changes in the allocation of allowance for loan losses and its allocation by impairment methodology and the related investment in loans:
As reported:
 
Three Months Ended March 31, 2018
(in thousands)
Real Estate
 
Commercial
 
Financial
Institutions
 
Consumer
and Others
 
Total
Balances at beginning of the period
$
30,246

 
$
33,731

 
$
4,362

 
$
3,661

 
$
72,000

(Reversal of) provision for loan losses
(864
)
 
578

 
(691
)
 
977

 

Loans charged-off
 
 
 
 
 
 
 
 
 
Domestic

 
(382
)
 

 
(19
)
 
(401
)
International

 

 

 
(400
)
 
(400
)
Recoveries
34

 
832

 

 
53

 
919

Balances at end of the period
$
29,416

 
$
34,759

 
$
3,671

 
$
4,272

 
$
72,118

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses by impairment methodology
 
 
 
 
 
 
 
 
 
Individually evaluated
$

 
$
2,226

 
$

 
$

 
$
2,226

Collectively evaluated
29,416

 
32,533

 
3,671

 
4,272

 
69,892

 
$
29,416

 
$
34,759

 
$
3,671

 
$
4,272

 
$
72,118

Investment in loans, net of unearned income
 
 
 
 
 
 
 
 
 
Individually evaluated
$
11,238

 
$
15,055

 
$

 
$
342

 
$
26,635

Collectively evaluated
2,699,872

 
2,243,345

 
416,292

 
564,306

 
5,923,815

 
$
2,711,110

 
$
2,258,400

 
$
416,292

 
$
564,648

 
$
5,950,450


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Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


Changes in the allocation of allowance for loan losses and its allocation by impairment methodology and the related investment in loans:
As revised:
 
Three Months Ended March 31, 2018
(in thousands)
Real Estate
 
Commercial
 
Financial
Institutions
 
Consumer
and Others
 
Total
Balances at beginning of the period
$
31,290

 
$
32,687

 
$
4,362

 
$
3,661

 
$
72,000

(Reversal of) provision for loan losses
(821
)
 
535

 
(691
)
 
977

 

Loans charged-off
 
 
 
 
 
 
 
 

Domestic

 
(382
)
 

 
(19
)
 
(401
)
International

 

 

 
(400
)
 
(400
)
Recoveries
34

 
832

 

 
53

 
919

Balances at end of the period
$
30,503

 
$
33,672

 
$
3,671

 
$
4,272

 
$
72,118

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses by impairment methodology
 
 
 
 
 
 
 
 
 
Individually evaluated
$

 
$
2,226

 
$

 
$

 
$
2,226

Collectively evaluated
30,503

 
31,446

 
3,671

 
4,272

 
69,892

 
$
30,503

 
$
33,672

 
$
3,671

 
$
4,272

 
$
72,118

Investment in loans, net of unearned income
 
 
 
 
 
 
 
 
 
Individually evaluated
$
11,238

 
$
15,055

 
$

 
$
342

 
$
26,635

Collectively evaluated
2,803,394

 
2,139,788

 
416,292

 
564,341

 
5,923,815

 
$
2,814,632

 
$
2,154,843

 
$
416,292

 
$
564,683

 
$
5,950,450












12

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


Changes in the allocation of allowance for loan losses and its allocation by impairment methodology and the related investment in loans:
Effects of change:
 
Three Months Ended March 31, 2018
(in thousands)
Real Estate
 
Commercial
 
Financial
Institutions
 
Consumer
and Others
 
Total
Balances at beginning of the period
$
1,044

 
$
(1,044
)
 
$

 
$

 
$

(Reversal of) provision for loan losses
43

 
(43
)
 

 

 

Loans charged-off
 
 
 
 
 
 
 
 
 
Domestic

 

 

 

 

International

 

 

 

 

Recoveries

 

 

 

 

Balances at end of the period
$
1,087

 
$
(1,087
)
 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses by impairment methodology
 
 
 
 
 
 
 
 
 
Individually evaluated
$

 
$

 
$

 
$

 
$

Collectively evaluated
1,087

 
(1,087
)
 

 

 

 
$
1,087

 
$
(1,087
)
 
$

 
$

 
$

Investment in loans, net of unearned income
 
 
 
 
 
 
 
 
 
Individually evaluated
$

 
$

 
$

 
$

 
$

Collectively evaluated
103,522

 
(103,557
)
 

 
35

 

 
$
103,522

 
$
(103,557
)
 
$

 
$
35

 
$


13

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


2.
Securities
Amortized cost and approximate fair values of securities available for sale are summarized as follows:
 
March 31, 2019
 
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair Value
(in thousands)
 
Gains
 
Losses
 
U.S. government sponsored enterprise debt securities
$
899,571

 
$
4,687

 
$
(13,800
)
 
$
890,458

Corporate debt securities
258,421

 
1,089

 
(1,168
)
 
258,342

U.S. government agency debt securities
218,813

 
362

 
(3,839
)
 
215,336

Municipal bonds
162,123

 
2,295

 
(430
)
 
163,988

Mutual funds
24,267

 

 
(800
)
 
23,467

Commercial paper

 

 

 

 
$
1,563,195

 
$
8,433

 
$
(20,037
)
 
$
1,551,591

 
December 31, 2018
 
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair Value
(in thousands)
 
Gains
 
Losses
 
U.S. government sponsored enterprise debt securities
$
840,760

 
$
2,197

 
$
(22,178
)
 
$
820,779

Corporate debt securities
357,602

 
139

 
(5,186
)
 
352,555

U.S. government agency debt securities
221,682

 
187

 
(4,884
)
 
216,985

Municipal bonds
162,438

 
390

 
(2,616
)
 
160,212

Mutual funds
24,266

 

 
(1,156
)
 
23,110

Commercial paper
12,448

 

 
(38
)
 
12,410

 
$
1,619,196

 
$
2,913

 
$
(36,058
)
 
$
1,586,051

At March 31, 2019 and December 31, 2018, the Company had no foreign sovereign debt securities.

14

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


The Company’s securities available for sale with unrealized losses that are deemed temporary, aggregated by the length of time that individual securities have been in a continuous unrealized loss position, are summarized below:
 
March 31, 2019
 
Less Than 12 Months
 
12 Months or More
 
Total
(in thousands)
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
U.S. government sponsored enterprise debt securities
$
74,413

 
$
(1,995
)
 
$
524,470

 
$
(11,805
)
 
$
598,883

 
$
(13,800
)
Corporate debt securities
72,106

 
(365
)
 
75,776

 
(803
)
 
147,882

 
(1,168
)
Municipal bonds

 

 
48,859

 
(430
)
 
48,859

 
(430
)
U.S. government agency debt securities
43,198

 
(436
)
 
136,260

 
(3,403
)
 
179,458

 
(3,839
)
Mutual funds

 

 
23,220

 
(800
)
 
23,220

 
(800
)
Commercial paper

 

 

 

 

 

 
$
189,717

 
$
(2,796
)
 
$
808,585

 
$
(17,241
)
 
$
998,302

 
$
(20,037
)

 
December 31, 2018
 
Less Than 12 Months
 
12 Months or More
 
Total
(in thousands)
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
U.S. government sponsored enterprise debt securities
$
90,980

 
$
(2,995
)
 
$
608,486

 
$
(19,183
)
 
$
699,466

 
$
(22,178
)
Corporate debt securities
243,667

 
(3,800
)
 
75,762

 
(1,386
)
 
319,429

 
(5,186
)
Municipal bonds
63,580

 
(939
)
 
133,886

 
(3,945
)
 
197,466

 
(4,884
)
U.S. government agency debt securities
1,449

 
(6
)
 
94,331

 
(2,610
)
 
95,780

 
(2,616
)
Mutual funds

 

 
22,865

 
(1,156
)
 
22,865

 
(1,156
)
Commercial paper
12,410

 
(38
)
 

 

 
12,410

 
(38
)
 
$
412,086

 
$
(7,778
)
 
$
935,330

 
$
(28,280
)
 
$
1,347,416

 
$
(36,058
)
At March 31, 2019 and December 31, 2018, debt securities issued or guaranteed by U.S. government-sponsored entities and agencies held by the Company were issued by institutions which the Company believes to posses little credit risk. The Company does not consider these securities to be other-than-temporarily impaired because the decline in fair value is attributable to changes in interest rates and investment securities markets, generally, and not credit quality. The Company does not have the intent to sell these debt securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery.
Unrealized losses on municipal and corporate debt securities, at March 31, 2019 and December 31, 2018, are attributable to changes in interest rates and investment securities markets, generally, and as a result, temporary in nature. The Company does not consider these securities to be other-than-temporarily impaired because the issuers of these debt securities are considered to be high quality, and management does not intend to sell these investments and it is more likely than not that it will not be required to sell these investments before their anticipated recovery.

15

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)

Amortized cost and approximate fair values of securities held to maturity, are summarized as follows:
 
March 31, 2019
 
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair Value
(in thousands)
 
Gains
 
Losses
 
Securities Held to Maturity -
 
 
 
 
 
 
 
   U.S. government sponsored enterprise debt securities
$
81,088

 
$
79

 
$
(1,635
)
 
$
79,532

   U.S. Government agency debt securities
2,821

 
22

 

 
2,843

 
$
83,909

 
$
101

 
$
(1,635
)
 
$
82,375

 
December 31, 2018
 
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair Value
(in thousands)
 
Gains
 
Losses
 
Securities Held to Maturity -
 
 
 
 
 
 
 
   U.S. government sponsored enterprise debt securities
$
82,326

 
$

 
$
(3,889
)
 
$
78,437

   U.S. Government agency debt securities
2,862

 

 
(49
)
 
2,813

 
$
85,188

 
$

 
$
(3,938
)
 
$
81,250


Contractual maturities of securities at March 31, 2019 are as follows:
 
Available for Sale
 
Held to Maturity
(in thousands)
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Within 1 year
$
34,856

 
$
34,769

 
$

 
$

After 1 year through 5 years
239,679

 
239,297

 

 

After 5 years through 10 years
172,190

 
172,421

 

 

After 10 years
1,092,203

 
1,081,637

 
83,909

 
82,375

No contractual maturities
24,267

 
23,467

 

 

 
$
1,563,195

 
$
1,551,591

 
$
83,909

 
$
82,375


3.
Loans
The loan portfolio consists of the following loan classes:
(in thousands)
March 31,
2019
 
December 31,
2018
Real estate loans
 
 
 
Commercial real estate
 
 
 
Nonowner occupied
$
1,852,903

 
$
1,809,356

Multi-family residential
878,239

 
909,439

Land development and construction loans
291,416

 
326,644

 
3,022,558

 
3,045,439

Single-family residential
535,306

 
533,481

Owner occupied
801,856

 
777,022

 
4,359,720

 
4,355,942

Commercial loans
1,239,525

 
1,380,428

Loans to financial institutions and acceptances
27,985

 
68,965

Consumer loans and overdrafts
107,208

 
114,840

 
$
5,734,438

 
$
5,920,175

The amounts above include loans under syndication facilities of approximately $640 million and $807 million at March 31, 2019 and December 31, 2018, respectively, which include Shared National Credit facilities and agreements to enter into credit agreements among other lenders (club deals), and other agreements.
The following tables summarize international loans by country, net of loans fully collateralized with cash of approximately $18.4 million and $19.5 million at March 31, 2019 and December 31, 2018, respectively.
 
March 31, 2019
(in thousands)
Venezuela
 
Others (1)
 
Total
Real estate loans
 
 
 
 
 
Single-family residential (2)
$
124,772

 
$
6,525

 
$
131,297

Commercial loans

 
63,061

 
63,061

Loans to financial institutions and acceptances

 
8,000

 
8,000

Consumer loans and overdrafts (3)
25,763

 
8,228

 
33,991

 
$
150,535

 
$
85,814

 
$
236,349

__________________
(1)
Loans to borrowers in fifteen other countries which do not individually exceed 1% of total assets.
(2)
Corresponds to mortgage loans secured by single-family residential properties located in the U.S.
(3)
Mostly comprised of credit card extensions of credit to customers with deposits with the Bank. Charging privileges for Venezuela resident card holders are suspended when the cardholders’ average deposits decline below the outstanding credit balance. At the beginning of 2018, the Company changed the monitoring of such balances from quarterly to monthly. The Company determined to discontinue its international credit cards in April 2019.


16

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)

 
December 31, 2018
(in thousands)
 
Venezuela
 
Others (1)
 
Total
Real estate loans
 
 
 
 
 
 
Single-family residential (2)
 
$
128,971

 
$
6,467

 
$
135,438

Commercial loans
 

 
73,636

 
73,636

Loans to financial institutions and acceptances
 

 
49,000

 
49,000

Consumer loans and overdrafts (3)
 
28,191

 
13,494

 
41,685

 
 
$
157,162

 
$
142,597

 
$
299,759

__________________
(1)
Loans to borrowers in seventeen other countries which do not individually exceed 1% of total assets.
(2)
Corresponds to mortgage loans secured by single-family residential properties located in the U.S.
(3)
Mostly comprised of credit card extensions of credit to customers with deposits with the Bank. Charging privileges for Venezuela resident card holders are suspended when the cardholders’ average deposits decline below the outstanding credit balance. At the beginning of 2018, the Company changed the monitoring of such balances from quarterly to monthly.

The age analysis of the loan portfolio by class, including nonaccrual loans, as of March 31, 2019 and December 31, 2018 are summarized in the following tables:
 
March 31, 2019
 
Total Loans,
Net of
Unearned
Income
 
 
 
Past Due
 
Total Loans in
Nonaccrual
Status
 
Total Loans
90 Days or More
Past Due
and Accruing
(in thousands)
 
Current
 
30-59
Days
 
60-89
Days
 
Greater than
90 Days
 
Total Past
Due
 
 
Real estate loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonowner occupied
$
1,852,903

 
$
1,852,903

 
$

 
$

 
$

 
$

 
$

 
$

Multi-family residential
878,239

 
877,574

 

 
665

 

 
665

 
665

 

Land development and construction loans
291,416

 
291,416

 

 

 

 

 

 

 
3,022,558

 
3,021,893

 

 
665

 

 
665

 
665

 

Single-family residential
535,306

 
523,172

 
7,802

 
921

 
3,411

 
12,134

 
6,514

 

Owner occupied
801,856

 
799,187

 
408

 
1,880

 
381

 
2,669

 
5,192

 

 
4,359,720

 
4,344,252

 
8,210

 
3,466

 
3,792

 
15,468

 
12,371

 

Commercial loans
1,239,525

 
1,234,890

 
3,151

 
399

 
1,085

 
4,635

 
7,361

 

Loans to financial institutions and acceptances
27,985

 
27,985

 

 

 

 

 

 

Consumer loans and overdrafts
107,208

 
105,434

 
587

 
434

 
753

 
1,774

 
37

 
749

 
$
5,734,438

 
$
5,712,561

 
$
11,948

 
$
4,299

 
$
5,630

 
$
21,877

 
$
19,769

 
$
749




17

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)

 
December 31, 2018
 
Total Loans,
Net of
Unearned
Income
 
 
 
Past Due
 
Total Loans in
Nonaccrual
Status
 
Total Loans
90 Days or More
Past Due
and Accruing
(in thousands)
 
Current
 
30-59
Days
 
60-89
Days
 
Greater than
90 Days
 
Total Past
Due
 
 
Real estate loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonowner occupied
$
1,809,356

 
$
1,809,356

 
$

 
$

 
$

 
$

 
$

 
$

Multi-family residential
909,439

 
909,439

 

 

 

 

 

 

Land development and construction loans
326,644

 
326,644

 

 

 

 

 

 

 
3,045,439

 
3,045,439

 

 

 

 

 

 

Single-family residential
533,481

 
519,730

 
7,910

 
2,336

 
3,505

 
13,751

 
6,689

 
419

Owner occupied
777,022

 
773,876

 
2,800

 
160

 
186

 
3,146

 
4,983

 

 
4,355,942

 
4,339,045

 
10,710

 
2,496

 
3,691

 
16,897

 
11,672

 
419

Commercial loans
1,380,428

 
1,378,022

 
704

 
1,062

 
640

 
2,406

 
4,772

 

Loans to financial institutions and acceptances
68,965

 
68,965

 

 

 

 

 

 

Consumer loans and overdrafts
114,840

 
113,227

 
474

 
243

 
896

 
1,613

 
35

 
884

 
$
5,920,175

 
$
5,899,259

 
$
11,888

 
$
3,801

 
$
5,227

 
$
20,916

 
$
16,479

 
$
1,303

At March 31, 2019 and December 31, 2018, loans with an outstanding principal balance of $1,289 million and $1,680 million, respectively, were pledged as collateral to secure advances from the FHLB.

18

Table of Contents
Mercantil Bank Holding Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (Unaudited)


4.
Allowance for Loan Losses
The analyses by loan segment of the changes in the allowance for loan losses for the three months ended March 31, 2019 and 2018, and its allocation by impairment methodology and the related investment in loans, net as of March 31, 2019 and 2018 are summarized in the following tables:
 
Three Months Ended March 31, 2019
(in thousands)
Real Estate
 
Commercial
 
Financial
Institutions
 
Consumer
and Others
 
Total
Balances at beginning of the period
$
22,778

 
$
30,018

 
$
445

 
$
8,521

 
$
61,762

(Reversal of) provision for loan losses
(322
)
 
(31
)
 
(339
)
 
692

 

Loans charged-off
 
 
 
 
 
 
 
 
 
Domestic

 
(992
)
 

 
(196
)
 
(1,188
)
International

 
(18
)
 

 
(406
)
 
(424
)
Recoveries

 
123

 

 
49

 
172

Balances at end of the period
$
22,456

 
$
29,100

 
$
106

 
$
8,660

 
$
60,322

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses by impairment methodology
 
 
 
 
 
 
 
 
 
Individually evaluated
$

 
$
1,593

 
$

 
$
1,202

 
$
2,795

Collectively evaluated
22,456

 
27,507

 
106

 
7,458

 
57,527

 
$
22,456

 
$
29,100

 
$